Less Cash economy – a policy decisions related S.269SU accepting payments through certain modes- late actions by authorities but quick implementations expected – a discussion on provisions and related notifications and circulars.

[DEV KUMAR KOTHARI]

Related new provisions:

Sections 269SU , 271DB

Related old provisions:

S.40A (3), S. 269SS ,269ST,  S.269T etc.

Summary:

As discussed in this write-up, it appears that though very late actions are taken by government authorities in issuing notifications but quick implementation is expected from business. Ground realities are also not considered while issuing notifications and then circulars are issued to make some relaxations. Relaxations are also made with conditions which make relaxation not applicable in most of cases. There should be proper understanding of business and ground realities.  

New provisions with highlights:

Income-tax Act, 1961

¹[Acceptance of payment through prescribed electronic modes.

“269SU. Every person, carrying on business, shall provide facility for accepting payment through prescribed electronic modes, in addition to the facility for other electronic modes, of payment, if any, being provided by such person, if his total sales, turnover or gross receipts, as the case may be, in business exceeds fifty crore rupees during the immediately preceding previous year.]

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Notes

1. Inserted vide FINANCE (NO. 2) ACT, 2019 w.e.f. 01-11-2019

Provision for penalty is reproduced below withhighlights:

¹[Penalty for failure to comply with provisions of section 269SU.

271DB. (1) If a person who is required to provide facility for accepting payment through the prescribed electronic modes of payment referred to in section 269SU, fails to provide such facility, he shall be liable to pay, by way of penalty, a sum of five thousand rupees, for every day during which such failure continues:

Provided that no such penalty shall be imposable if such person proves that there were good and sufficient reasons for such failure.

(2) Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner of Income-tax.]

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Notes

1. Inserted vide FINANCE (NO. 2) ACT, 2019 w.e.f. 01-11-2019.

 

Late action by government authorities but very quick implementation expected by public and taxpayers.

The following are mandatory facility for payment  to be provided, if turnover during FY 2018-19 was more than  ₹ 50 Crore:

 (i) Debit Card powered by RuPay;

(ii) Unified Payments Interface (UPI) (BHIM-UPI); and

                   (iii) Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code).”

This is effective from 01.01.2020 in view of new Rule effective from  1st day of January, 2020 which was inserted vide NOTIFICATION NO. 105/2019 dt.  30th December, 2019

Therefore, time allowed for implementation was just 2 days after date of notification irrespective of date of publication in Gazette and without wide publicity in this regard.

When there is huge delay in prescribing mandatory modes (all of which are in vogue for long time), it is very harsh on dealers / business men to allow only two days for implementation. Thanks Bureaucrats to be kind enough to prescribe that penalty will be attracted from 01.02.2020, as per notification which is reproduced below with highlights added:.

Notification - Income Tax - Income Tax

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION NO. 105/2019

New Delhi, the 30th December, 2019

G.S.R. 960(E).-In exercise of the powers conferred by section 269SU read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend Income-tax Rules, 1962, namely:-

1. Short title and commencement.-

(1) These rules may be called the Income-tax (16th Amendment) Rules, 2019.

(2) They shall come into force from 1st day of January, 2020.

2. In the Income-tax Rules, 1962, after rule 119A, the following rule shall be inserted, namely:-

“119AA. Modes of payment for the purpose of section 269SU.- Every person, carrying on business, if his total sales, turnover or gross receipts, as the case may be, in business exceeds fifty crore rupees during the immediately preceding previous year shall provide facility for accepting payment through following electronic modes, in addition to the facility for other electronic modes of payment, if any, being provided by such person, namely:-

(i) Debit Card powered by RuPay;

(ii) Unified Payments Interface (UPI) (BHIM-UPI); and

(iii) Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code).”.

[F. No. 370142/35/2019-TPL]

ANKUR GOYAL, Under Secy.

 

Circular - Income Tax

Circular No. 32/2019

F.No.370142/35/2019-TPL

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

Dated: 30th December, 2019

Sub.: Clarifications in respect of prescribed electronic modes under section 269SU of the Income-tax Act, 1961 - reg.

In furtherance to the declared policy objective of the Government to encourage digital economy and move towards a less-cash economy, a new provision namely Section 269SU was inserted in the Income-tax Act, 1961 ("the Act"), vide the Finance (No. 2) Act 2019 ("the Finance Act"), which provides that every person having a business turnover of more than ₹ 50 Crore ("specified person") shall mandatorily provide facilities for accepting payments through prescribed electronic modes. The said electronic modes have been prescribed vide notification no. 105/2019 dated 30.12.2019 ("prescribed electronic modes"). Therefore, with effect from 01^st  January, 2020, the specified person must provide the facilities for accepting payment through the prescribed electronic modes. Further, Section 10A of the Payment and Settlement Systems Act 2007, inserted by the Finance Act, provides that no Bank or system provider shall impose any charge on a payer making payment, or a beneficiary receiving payment, through electronic modes prescribed under Section 269SU of the Act. Consequently, any charge including the MDR (Merchant Discount Rate) shall not be applicable on or after 01^st January, 2020 on payment made through prescribed electronic modes.

2. In this connection, it may be noted that the Finance Act has also inserted section 271DB in the Act, which provides for levy of penalty of five thousand rupees per day in case of failure by the specified person to comply with the provisions of section 269SU. In order to allow sufficient time to the specified person to install and operationalise the facility for accepting payment through the prescribed electronic modes, it is hereby clarified that the penalty under section 271DB of the Act shall not be levied if the specified person installs and operationalises the facilities on or before 31^st January, 2020. However, if the specified person fails to do so, he shall be liable to pay a penalty of five thousand rupees per day from 01^st February, 2020 under section 271DB of the Act for such failure.

(Ankur Goyal)

Under Secretary to the Govt. of India

 New Circular exempting B2B businesses subject to conditions:

 Circular - Income Tax

Circular No. 12/2020

F. No. 370142/35/2019-TPL

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

Dated: 20^th May, 2020

Subject: Clarifications in respect of prescribed electronic modes under Section 269SU of the Income-tax Act, 1961 - reg.

In furtherance to the declared policy objective of the Government to encourage digital Otransactions and move towards a less-cash economy, a new provision namely Section 269SU was inserted in the Income-tax Act, 1961 ("the Act"), vide the Finance (No. 2) Act 2019. This section requires every person carrying on business and having sales/turnover/gross receipts from business of more than ₹ 50 Crores ("specified person") in the immediately preceding previous year to mandatorily provide facilities for accepting payments through prescribed electronic modes. Subsequently vide notification no. 105/2019 dated 30.12.2019 (i) Debit Card powered by RuPay; (ii) Unified Payments Interface (UPI) (BHIM-UPI); and (iii) Unified Payments Interface Quick Response Code (UPI QR Code) (BHIM-UPI QR Code) were notified as prescribed electronic modes.

2.  Representations have been received stating that the above requirement of mandatory facility for payments through the prescribed electronic modes is generally applicable in B2C (Business to Consumer) businesses, which directly deal with retail customers. Moreover, since the prescribed electronic modes have a maximum payment limit per transaction or per day they are not so relevant to B2B (Business to Business) businesses, which generally receive large payments through other electronic modes of payment such as NEFT or RTGS. Mandating such businesses to provide the facility for accepting payments through prescribed electronic modes would cause administrative inconvenience and impose additional costs.

3.  In view of the above, it is hereby clarified that the provisions of section 269SU of the Act shall not be applicable to a specified person having only B2B transactions (i.e. no transaction with retail customer/consumer) if at least 95% of aggregate of all amounts received during the previous year, including amount received for sales, turnover or gross receipts, are by any mode other than cash.

(Ankur Goyal)

Under Secretary to the Govt. of India

 B2B business is exempted but with unreasonable conditions:

 It seems that earlier conditions to provide for mandatory additional modes was imposed without consideration of ground realities about business transactions in B 2 B mode that is where transactions are between two business persons and not with a consumer. Realising this  reality , now above circular has been issued exempting B 2 B business concerns but the conditions imposed are unreasonable. The conditions prescribed in clarification are : 

             a specified person having only B2B transactions    (i.e. no transaction with retail customer/consumer)  and

if at least 95% of aggregate of all amounts received during the previous year, including amount received for sales, turnover or gross receipts, are by any mode other than cash.

 

 

As per above if there is any transaction with retail customer or consumer then the exemption shall not be applicable.

Retail customer is not defined but it would generally mean that a retailer who purchases goods in small quantity and resell to consumers. Any sale to a retail customer should not be a condition because in local area of factories, plantations, establishment of auctioneers, whole sellers etc. some sales took place to local shop keepers. For example in area of sugar mills or Tea Estates local shop keepers purchases small quantities of sugar from sugar mills and tea from tea estates for selling to  consumers in local area.  

Any sale to consumer should also not be a condition because some sales to consumers as direct sale is a regular feature for marketing and publicity. Even when goods are sold and distributed through whole sellers, sometimes promotional sales are undertaken and goods are sold to retailers and consumers.

95% payment by modes other than cash is also not a reasonable condition. It will be difficult to keep a track on such limits by businessman and also by tax authorities.

When other provisions to reduce cash payments in business to business module are applicable like S.40A (3), 269SS, there is no need to keep such condition in the clarification issued by the Board.

Whether Circular is enough:

It is to be observed that when as per main provision there is no distinction between B2B and B2C modules of businesses, how a circular can make an exemption for B 2 B.  Furthermore this circular is not concerning to imposing of tax but on implementation of government’s policies, author have doubts about validity of the Circular. other article on the same subject:

Readers may refer to the following article also:

Prescribed electronic modes of payment u/s 269SU An Article By: - Mehul Kothari

February 13, 2020